Famed investor backs away from web-obsessed Microsoft

Accuses firm of 'Google-envy'

A well-known hedge-fund manager has hit out at Microsoft’s “overaggressive and almost panicky” attempts to plump up its online investments.

David Einhorn, president and founder of Greenlight Capital, yesterday accused Microsoft of suffering from “Google-envy” and said he was giving up on investing in the software giant until it learns to play ball. The scolding came in the firm's latest report to shareholders, according to Silicon Valley Insider.

We wanted to share some thoughts on Microsoft (MSFT), which we closed during the quarter. We believe that we purchased the shares at an attractive time, and for a good while the investment worked nicely. As has been our habit of late, we overstayed our welcome as the shares peaked after the company announced a very good September 2007 quarter.

Since then, management has acted in an overaggressive and almost panicky fashion regarding its online offering. First, it sought to acquire Yahoo! and then after that failed, it announced extremely high internal investment requirements to pursue this 'huge' opportunity (read: 'Google-envy'). We doubt the opportunity is what they say it is and wish MSFT focused on its core strength: software.

The CEO is a very smart and very wealthy man. Perhaps, he is so wealthy that he has bigger ideas and aspirations than making MSFT’s shareholders wealthier. We’ve given up on MSFT for now as we feel better investing in companies where management at least appears to be trying to work for shareholders.

Many will likely agree with Einhorn's grumbles about Microsoft's failed efforts to out-Google Google, while others have lambasted CEO Steve Ballmer's online vision as short-sighted.

Einhorn famously fingered the Lehman Brothers debacle months before it collapsed, questioning the accuracy of accounting and warning that trouble was brewing at the brokerage firm.

He has felt the pinch from the deepening financial crisis hitting the world's banking systems. In September his company suffered a huge loss when regulators at the US Securities and Exchange Commission banned short selling of more than 900 financial services stocks.

Meanwhile, Microsoft shares have tanked over the past few weeks forcing Ballmer to admit on his recent tour of Europe that no one was safe from the dollar meltdown on Wall Street.

"Financial issues are going to affect both business spending and consumer spending, and particularly... spending by the financial services industry," he said. ®